Mortgage demand lifts as interest rates stabilise: Equifax

The latest Equifax Quarterly Consumer Credit Insights – December 2023 report has revealed that mortgage demand rose 0.5 per cent year on year, marking the first quarter of positive growth recorded since 2021, while secured credit demand derived from mortgages and auto loans increased 1.1 per cent in 4Q23 compared to the same period in 2022.

Additionally, auto loan demand grew 3.9 per cent in the fourth quarter of 2023 when compared to the same quarter in 2022.

According to general manager, advisory and solutions at Equifax, Kevin James, the stabilisation of interest rates has had a positive impact on mortgages, with the demand share for new mortgages increasing to 28 per cent in 4Q23.

“Conversely, refinance demand dampened, suggesting that existing mortgages are also experiencing some financial relief,” Mr James said.

Furthermore, the data has revealed that the rate of acceleration in early delinquencies has eased despite mortgage arrears lifting in the fourth quarter.

“The number of accounts 30–89 days past due grew 33 per cent year on year in Q4, compared to a 47 per cent increase reported last quarter – another indication that softer economic conditions are providing some breathing room for mortgage holders,” Mr James added.

Equifax’s data came as the latest Australian Bureau of Statistics (ABS) data on Lending Indicators revealed that the value of new owner-occupier loan commitments for housing rose 10.1 per cent through the year to November 2023, with the number of commitments also increasing by 7.3 per cent.

The report further revealed that unsecured consumer credit applications fell 5 per cent when compared to the December quarter 2022. Personal loan applications and buy now, pay later (BNPL) applications both fell by 0.7 per cent and 18.7 per cent, respectively, during this period. Credit card applications grew 1.2 per cent.

Mr James added: “Throughout 2023, many consumers adjusted their spending habits to cope with the higher cost of living and rising interest rates.

“In Q4, these changes were coupled with the lower rate of inflation and stabilisation of interest rates, bringing some relief to household budgets.

“This was reflected in the decreased demand for unsecured credit, as people relied less on credit cards and personal loans to bridge the financial gap.”

However, Mr James noted that signs of stress were still apparent as credit card arrears remained above 2022 levels, with accounts 90-plus days past due increasing 15 per cent on 4Q22.

“We often see a spike in arrears in the first half of the year as festive season spending hits credit balances. We expect consumers’ financial resilience will be tested as the record spending seen in November falls due over the coming months,” Mr James said.

[RELATED: Owner-occupier lending bumped up in November: ABS]